Class action lawsuits not suited to Hong Kong

Shirley Yuen says cases in other jurisdictions show the risk of litigation abuse and unfair outcomes

PUBLISHED : Wednesday, 16 October, 2013, 12:00am
UPDATED : Tuesday, 15 October, 2013, 10:29pm

It is argued by some that Hong Kong needs a class action system, which will give people better access to justice and consumers a fairer share of settlements. And the argument is made, of course, that other jurisdictions have, or are introducing, class action, so why not Hong Kong?

This argument may sound attractive in principle. However, there is a real risk that, in the zeal to expand opportunities for private litigation, we will open a Pandora's box of litigation abuse and move to a legal system that is less fair, less accessible and which makes it harder for meritorious claims to be heard, because the courts are clogged with claims motivated by class action lawyers seeking to make a quick buck.

There are different ways to structure a class action system, but in a nutshell it allows a named plaintiff or a number of named plaintiffs to file a claim on behalf of a "class" of people or businesses who claim to have suffered a common injury.

The plaintiffs get their "class" certified by the court and they are then able to sue not only on their own behalf, but also on behalf of all other people in that class.

Ultimately, litigation is expensive. Not all defendants have deep pockets

A closer look at how they have worked in the US, which opened the door to class action many decades ago and which is now well known for its litigious excesses, might give us cause to look more critically at the costs, the potential pitfalls and who really benefits.

The recent Facebook class action lawsuit in the US provides a stark example. In this highly controversial settlement, the class action lawyers walked away with US$2.3 million while the class members received absolutely nothing.

Instead of paying out the class members, Facebook agreed that it would make a US$6.5 million payment to a new foundation it would partly control.

In the now-infamous Bank of Boston class action, class members actually lost money in the settlement; they received between US$2.19 and US$8.76, but also had their accounts debited by up to US$91 to pay the US$8.5 million fees for lawyers that many never even knew they had "hired".

The argument often put is that allowing such a system increases the efficiency of litigation and that this outweighs the injustice to individuals who have lost control of their legal rights.

There is a fundamental question whether "efficiency" is a sufficient justification for taking away fundamental legal rights that are guaranteed to us under the Basic Law and the Hong Kong Bill of Rights.

One must also ask whether the current system is really inefficient.

Hong Kong has a number of different tiers to its court system, from the Small Claims Tribunal through to the district and high courts. The tribunal will hear claims up to HK$50,000 and has fewer procedural rules, based on the recognition that claims involving smaller sums should be run in a manner that is proportionate to what is at stake. Lawyers are also not allowed to appear in the tribunal, to encourage parties to keep costs proportionate to what is in dispute.

On the other hand, where a number of people want to make a claim about the same issue, they may run the case as joint plaintiffs or start separate claims, giving them the freedom to choose who represents them and how their case will be presented (likewise for parties running a common defence).

Where separate claims involving similar facts or legal issues have been made, there are also processes for allowing the claims to be addressed together or in a manner that is more efficient (for example, by seeking an order for joinder of claims or allowing a legal point that is common to both cases to be decided before the cases proceed further).

Ultimately, litigation is expensive. Not all defendants have deep pockets and one of the more pernicious aspects of US experience is that smaller firms, faced with an aggressive class action, sometimes choose to settle out of court rather than rack up expensive legal fees. That is not justice and it is not something we would wish to see inflicted on Hong Kong businesses.

Like any legal system in the world, ours is not without its shortcomings and nor is it a panacea for the issues that naturally arise in complex, modern societies. However, it is a system that has served Hong Kong very well.

Derived from our common law history, it draws on many hundreds of years of accumulated experience and wisdom in balancing the need for procedural fairness against the relative importance of the issue in dispute.

We should always strive to find ways to improve our current system. However, we need to ask ourselves whether class action, which would comprise a radical and wholesale change to our system, is the way to do this.

Shirley Yuen is CEO of the Hong Kong General Chamber of Commerce